In volume terms (i.e. after the effects of price change are removed from the dollar value of Australia's production) GDP recorded a growth rate of 2.8% in 2005-06. This was higher than the 2.7% recorded in the previous year.

30.4 EXPENDITURE ON GDP, Chain volume measures(a)

2001-02

2002-03

2003-04

2004-05

2005-06

$m

$m

$m

$m

$m

Final consumption expenditure

General government

146 210

150 840

156 783

162 837

168 049

Households

458 647

474 389

499 526

520 982

534 311

Total final consumption expenditure

604 778

625 160

656 296

683 819

702 360

Gross fixed capital formation

Private

147 909

172 038

186 422

196 638

213 763

Public

28 017

29 238

31 471

34 233

36 759

Total gross fixed capital formation

176 022

201 287

217 903

230 871

250 522

Domestic final demand

780 442

826 442

874 202

914 690

952 882

Changes in inventories

156

842

5 765

4 501

1 893

Gross national expenditure

780 767

827 696

879 908

919 191

954 775

Exports of goods and services

159 887

159 183

162 583

167 562

171 053

less Imports of goods and services

132 677

150 025

169 591

190 188

203 402

Statistical discrepancy(b)

-

-

-

-

-678

Gross domestic product

813 542

839 187

873 197

896 568

921 747

- nil or rounded to zero (including null cells)

(a) Reference year is 2004-05. Measures for years other than 2004-05 and 2005-06 are not additive.

The GDP account can also be used to show changes in the share of income accruing to labour (i.e. compensation of employees) compared with the share accruing to capital (i.e. profits, defined as the gross operating surplus of non-financial and financial corporations). Graphs 30.5 and 30.6 show how the shares of total factor income accruing to wages and to profits have changed since 1960-61. (Total factor income is equal to the sum of compensation of employees, gross operating surplus and gross mixed income.)

The highest recorded value of the wages share of total factor income was 62.4% in 1974-75. The wages share in 2005-06 was 53.6%, slightly lower than the previous year (53.9%), and at its lowest level since 1969-70. The profits share of total factor income has been growing steadily since 1998-99. In 2005-06 profits share was 26.9%, the highest share recorded.

The national income account shows the sources of national income and how much of this income is spent on final consumption. That part of income which is not spent in this way is saving. Table 30.7 shows annual time series from 2001-02 to 2005-06.

Graph 30.8 shows net saving by institutional sector as a proportion of GDP for the years 1960-61 to 2005-06. Household net saving as a percentage of GDP generally fluctuated between 6% and 7% between 1960-61 and 1971-72. It then rose to a peak of 11.6% in 1974-75. Since then it has fallen to a position in 2002-03 when consumption by households exceeded income and, consequently, household net saving was negative for the first time. Household net saving has remained negative since 2002-03. In 2005-06 consumption exceeded household income, by $3.8 billion (b) (table 30.9).

General government net saving was positive from 1960-61 to 1972-73 before turning negative from 1974-75 to 1996-97 (except for 1988-89). It has remained positive since 1997-98. In 2005-06 general government net saving was positive at 2.5% of GDP ($23.9b). In 2005-06 net saving of non-financial corporations was 1.0% of GDP ($10.0b). Net saving of financial corporations has been positive at about 1% to 2% of GDP for virtually all of its history. In 2005-06 net saving of financial corporations was 2.9% of GDP ($27.7b).

National capital account

The national capital account shows how the saving from the national income account and consumption of fixed capital (depreciation) are used to finance gross fixed capital formation. If, as is currently the case for Australia, the nation's saving and consumption of fixed capital are not sufficient to pay for all the fixed capital needed for Australian production, the shortfall must be borrowed from overseas. The amount borrowed from overseas is shown in the national capital account as a negative entry for net lending to non-residents. Table 30.9 shows the annual time series from 2001-02 to 2005-06.

Graph 30.10 shows gross fixed capital formation (investment) by institutional sector as a proportion of GDP. Investment by non-financial corporations generally fell during the 1970s and was reasonably stable up to the 1990s. It has generally been above 10% of GDP and in 2005-06 investment by non-financial corporations was 13.2% of GDP. Household investment as a proportion of GDP declined steadily between 1960-61 and 1973-74 but has since remained steady at around 10% of GDP. In 2005-06 the ratio to GDP was 10.5%. General government investment as a proportion of GDP peaked at 4.6% in 1975-76 and has generally fallen since then. It was 2.1% of GDP in 2005-06. The highest level of Financial corporations investment, expressed as a
proportion of GDP, was recorded in 1989-90 (2.0%). It has generally fallen since and was 0.8% of GDP in 2005-06.

Graph 30.11 shows net lending by institutional sector as a proportion of GDP. A positive percentage for a sector indicates that it is a net lender to other sectors; a negative percentage indicates that it is a net borrower.

The household sector has been a net lender for most years. As a proportion of GDP, net lending by households peaked in 1974-75 at 8.3%. Since then it has trended downwards and the household sector changed from a net lender to a net borrower in 1997-98. In 2005-06 household net borrowing was 4.9%. Non-financial corporations have been net borrowers over the entire period 1967-68 to 2005-06 (except for 1993-94), and the amounts borrowed have fluctuated significantly from year to year. As a proportion of GDP, their net borrowing was 5.0% in 2005-06.

In 2005-06 financial corporations net lending represented 2.8% of GDP, the highest recorded level. After recording a record level of borrowing as a proportion of GDP in 1992-93 (5.9%), general government borrowing steadily declined. From 1997-98 to 1999-2000 the sector was a net lender and in 2000-01 and 2001-02 general government was a net borrower before returning to being a net lender from 2002-03 to 2005-06. In 2005-06 general government net lending represented 1.7% of GDP.

The external account is derived from the detailed balance of payments current and capital accounts (see the International accounts and trade chapter). It shows Australia's exports and imports, incomes and transfers received by Australian residents from non-residents, and incomes and transfers payable to non-residents by Australian residents. The balance on the external account is net lending to non-residents. This is the same as the balance in the national capital account. Table 30.12 shows the external account for the last five years.

Australia has generally been a net borrower of funds from overseas. In the national accounts, this situation is reflected by a negative value for net lending to non-residents. The only exception to this pattern was in 1972-73. Net borrowing from non-residents, expressed as a proportion of GDP, increased significantly in the early-1980s and has remained at relatively high levels since then. The ratio of net borrowing from overseas to GDP in 2005-06 was 5.3%, down from 6.1% in 2004-05. Graph 30.13 shows net lending to non-residents as a proportion of GDP since 1960-61.

30.13 Net lending to overseas, relative to GDP

The growing importance of international trade to the Australian economy is illustrated by graph 30.14 which shows the ratios of exports and imports of goods and services to GDP in current prices since 1960-61. In 2005-06 the imports ratio was 21.8% and the exports ratio was 20.3%. Since 2000-01 imports increased 55.6% in volume terms compared with a 6.0% growth in exports.

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